Legal Definitions - survivorship annuity

A survivorship annuity is a type of financial product that provides a stream of regular payments, typically for life, to a designated individual (the annuitant). The key feature of a survivorship annuity is that it is structured to continue making payments to a secondary, designated beneficiary (the "survivor") after the original annuitant passes away.

This arrangement is often chosen to provide financial security for a spouse, partner, or other dependent, ensuring they continue to receive income even after the primary income recipient or annuitant is no longer alive. The terms, including the amount and duration of payments to the survivor, are established when the annuity contract is created.

Here are some examples illustrating a survivorship annuity:

• Example 1: Retirement Planning for a Couple

  Mr. and Mrs. Chen are planning for retirement. Mr. Chen has a pension plan that offers him a choice: a higher monthly payment that stops when he dies, or a slightly lower monthly payment that continues to Mrs. Chen if she outlives him. They choose the latter option, known as a joint and survivor annuity. If Mr. Chen passes away first, Mrs. Chen will continue to receive a portion (e.g., 50% or 100%) of the monthly pension payments for the rest of her life. This illustrates a survivorship annuity because the payments continue to a designated survivor after the primary annuitant's death, providing ongoing financial support.

• Example 2: Providing for a Dependent Adult Child

  Sarah has an adult son, David, who has a disability and relies on her for financial support. To ensure David's long-term care and living expenses are covered after her passing, Sarah purchases an annuity. The annuity is structured so that Sarah receives payments during her lifetime, but upon her death, the payments will automatically continue to David for the remainder of his life. This is a survivorship annuity because it guarantees a continuous income stream for David, the designated survivor, after Sarah, the primary annuitant, is no longer alive to provide for him directly.

• Example 3: Estate Settlement and Spousal Support

  Following the death of a wealthy individual, Mr. Rodriguez, his estate includes a significant sum of money. To ensure his surviving spouse, Mrs. Rodriguez, maintains a comfortable lifestyle without the burden of managing a large investment portfolio, the estate's executor uses a portion of the assets to purchase a survivorship annuity. This annuity provides Mrs. Rodriguez with regular monthly payments for the rest of her life, funded by the initial lump sum from the estate. Although Mr. Rodriguez is not the annuitant receiving payments, the annuity is established *because of* his death to provide for his survivor, functioning as a form of survivorship benefit derived from his estate planning. The annuity itself is then paid to Mrs. Rodriguez as the primary annuitant, with no further survivor designated.